Federal Circuit Holds Patent Owners Bear IPR Estoppel Burden of Proof

The Federal Circuit recently held, for the first time, that patent owners bear the burden of proof for an Inter Partes Review (“IPR”) Estoppel affirmative defense that an alleged infringer failed to include prior art in a previous IPR. In overturning the district court, the Federal Circuit held that a patent owner must prove, by a preponderance of the evidence, that an objective “skilled searcher” exercising “reasonable diligence” would have discovered the prior art before filing an IPR. If a skilled searcher could have discovered the prior art, the issue “could reasonably have been raised” in the IPR, and the challenger who failed to present the prior art is estopped from making the argument at trial in defense to a patent infringement lawsuit. See 35 U.S.C. § 315.

Ironburg Inventions owns U.S. Patent No. 8,641,525 which is directed to “a hand held controller for a video game console[.]” After the patent issued, Ironburg sent Valve Corporation a letter notifying Valve of its potential infringement. Valve began selling its product anyway, after which Ironburg filed suit for patent infringement. In response, Valve filed an IPR petition. The Patent Trial and Appeal Board (“PTAB”) granted the IPR on some, but not all, of Valve’s prior art arguments. The PTAB invalidated certain claims and upheld others.

Ironburg proceeded to trial with the remaining claims, where Valve argued invalidity based on two sets of prior art: (1) those the PTAB already rejected (the “Non-Instituted Prior Art”); and (2) prior art not presented during the IPR. The district court ruled in favor of Ironburg on both arguments, holding that IPR estoppel prohibited Valve’s invalidity arguments, because Valve had not proven why it was justified in arguing invalidity based on new prior art. After a five-day jury trial (held by Zoom, but that is for another post), the jury found that Valve infringed the patent and awarded Ironburg damages. Both parties appealed different issues from the trial.

The Federal Circuit, in setting forth the IPR estoppel analysis under 35 U.S.C. § 315, reiterated that IPR estoppel applies not just to those claims and grounds asserted in an IPR, but to all grounds which reasonably could have been asserted against the claims in an IPR. The court affirmed IPR estoppel on the Non-Instituted Prior Art because these arguments had actually been presented to during the IPR. But the Federal Circuit vacated the district court’s decision about the new prior art Valve did not present during its IPR.

Until now, district courts were divided about the burden of proof on IPR estoppel with some courts holding that the challenger bore the burden, while other holding that the patent owner bore the burden. The Federal Circuit resolved the split and held that the patent owner bears the burden of proof by a preponderance of the evidence because IPR estoppel is an affirmative defense. Thus, the patent owner must show “that a skilled searcher exercising reasonable diligence would have identified an invalidity ground” prior to the IPR to prove IPR estoppel based on new prior art.

While the Federal Circuit does not explain who a “skilled searcher” is or what constitutes “reasonable diligence,” the Court acknowledged that this new standard does not mean “scorched earth” searching. Instead, the district courts will be left to determine what establishes a “skilled searcher” exercising “reasonable diligence.” The Federal Circuit remanded for the district court to determine whether a “skilled searcher” using “reasonable diligence” would have discovered this prior art before the IPR. Going forward, patent owners asserting this kind of IPR estoppel will be in the notable position of arguing that a “skilled searcher” was reasonably likely to find prior art supporting an invalidity argument, while also arguing that the prior art does not invalidate the patent. New technologies like artificial intelligence could make prior art searching easier, further complicating the “reasonable diligence” analysis. And it will be interesting to see how accused infringers document their own “reasonable diligence” to defend against the IPR estoppel affirmative defense, which can raise additional issues of the attorney work-product privilege.